Searching a Venture Capital Network

There are literally thousands of investors in our venture capital network, but if you're looking purely for venture capital firms (not angel investors or private equity) you're going to be digging through less than a thousand. According to the National Venture Capital Association the, the active venture capital network in existence today is less than 500 firms, though you will probably still find interest in some outside that number.

There are three primary criteria to consider when starting your search - Industry, Location, and Funding Size.

With such a specific number of active firms available, the key is to figure out how to pare them down and rank them in order of which to approach first. Let's first take a look at how to filter and find them, and then determine in which order to rank and contact them.

Venture Capital Network Search Tips

There are three primary criteria to consider when starting your search - Industry, Location, and Funding Size. Once you’ve filtered through these criteria we would suggest you start looking into the portfolio investments of each firm.

Industry (Markets)

The single most important filter amongst venture capital groups is the industry or markets they pursue.

Venture Capital firms focus on particular markets that they have deep domain expertise in and where they think there will be the greatest upside potential. If nothing else, it's critical to at least know what markets a venture capital group invests in and how closely aligned they are with the industry and market you're in.

In some cases the venture capital group will be split up amongst its partners across different focus areas. Your best bet would be to pursue the partner who most likely has an affinity for your market, as they will be your most valuable champion through the venture capital pitch process.

There are times when a venture capital group will make investments outside of its core focus, but it's rare and it's usually based on an outside condition, such as investing in an entrepreneur that the firm has previously invested in on another startup.

Location

Venture Capital firms, like any investors, like to be as close to their investments as possible

Venture Capital firms, like any investors, like to be as close to their investments as possible, and that often means being physically present. We may be in the age of virtual presence and video conferencing, but nothing beats sitting right across from a real person and figuring out tough problems.

Therefore, you can expect to see a strong preference by venture capital groups to invest in their local areas. Anywhere an investor can reasonably get there and back within the same day is usually a safe bet. Not surprisingly, venture capitalists want to be home for dinner like everyone else.

It's certainly not unheard of for venture capital groups to invest outside of their neighborhood; it just presents more of a challenge than a local investment. As the entrepreneur pitching for capital, your chances are almost always better with investors that are close to home.

Funding Stage and Size

Not every venture capital firm invests at the same "stage" of a company's investment lifecycle. Some venture capital groups invest very early in a company's development, and may go in as early as the actual inception, although this is rare. That’s usually the domain of Angel Investors.

Venture Capital groups define their stage of investment differently, but you can think of them in roughly three categories:

Early Stage - The company probably has not raised money previously or has had a few angel investments but is still early in its formation. These rounds tend to be less than $2 million and are used for just getting the company off the ground.

Traditional VC - This is the most common type of venture capital stage, where the first round of investment ranging from $2 million to $10 million is invested in a company. The company is probably already capitalized by angel investors who put in the first $1 million or less.

Late Stage - The company has taken on at least one round of venture investment (or a similar structure) and is now going on to much later and larger rounds, probably in excess of $10 million or more.

You'll want to understand what stage each venture capital group puts their money into a company so you're not talking to a Late Stage investor about an Early Stage opportunity. These funds are typically geared toward a particular stage of investment because that's where they believe the opportunities lie.

A side note here – the “stage” tends to be more of a preference than an absolute barrier. You should know what stage they prefer to invest, but you shouldn’t discount a firm solely based on being in the wrong stage.

Portfolio (Extra Credit)

Within the venture capital group's industry focus lays their existing portfolio of investments. Nothing is a better indication of what types of investments they make than looking at the places where they've actually written checks.

After you've found a venture capital group that seems to invest in your industry, digging into their portfolio companies will help you understand what types of companies within the industry they have an affinity for. You'll also be able to find out which partners have made those particular investments so you can target those individuals for your own introductions.

Ranking Your Venture Capital Network Search Results

Once you've filtered your list by Industry, Funding Size, and Location, your next objective is to rank them in order of which you want to contact first.

This is where our friend the Internet comes in handy, and more specifically, popular social networks. What you'll first want to find is which firms you may have some sort of warm introduction to. Search the names of the partners or the firms in all of your most connected social networks like Facebook and Linkedin. Your best introductions are going to come from firms where there is some pre-existing relationship.

If that doesn't yield any results, your next best bet is to start with firms that may be within driving distance to you. It's easier to get a meeting with someone locally than it is far away, all things being equal. Local firms often are more receptive to local companies because they feel comfortable with a local connection.